Why China's Richest Man Could Buy Time Warner

[Morgan Wick]

Wow, I'm amazed there haven't been a bunch of posts moved to TIO.

Ownership rules based on citizenship seem like a relic of the mid 20th Century. If my CPA came to me tomorrow and told me it would make economic sense to change citizenship, my first question would be: How much is it worth? My friend are from all over the world. The United States is a pretty good place but it's not the only good place.

Yeah, I don't think Rupert Murdoch being Australian has anything to do with Fox News (or his British holdings for that matter), and by the same token Presidential rules based on country of birth are a relic of the 18th century, so even if Obama hadn't produced his birth certificate twice and been backed up by the Hawaii Department of Health, contemporary Hawaiian newspapers didn't include relevant birth announcements, the only people pushing the birther theories weren't crazy and otherwise unreliable people and the morons who believe them and refuse to believe any evidence that doesn't fit their preconceived notions, Fox News and other conservative news sources didn't give them legitimacy, and the mainstream media wasn't too scared, dysfunctional, and discredited to rebut them, how much would it even matter, really?

I read an article from a website that's talking about the same rumor (Jianlin, buying Time Warner) I'd say, he ends up buying Time Warner for $110 Billion, and constructs his headquarters for not only Warner Bros. But also headquarters for either ABC's or CBS' entertainment division. Since how he likes making bold moves, buying The ABC network, could be one of those bold moves that he makes, because he wants to make Time Warner the biggest media giant, it's already a media giant, but what I mean by the biggest media giant, by making it bigger than where it's at right now, and the only way how you do that is by buying one of the big 4 TV networks, and the only option maybe The ABC Network, because Comcast, and The Roberts Family, isn't going to cut NBC loose, neither is The Redstone family, as long as Summer Redstone lives, and especially The Murdoch family, there would be absolutely be no way that they're going to cut Fox loose, so I'd say he ends up either buying ABC, or CBS (after Summer Redstone dies). He says that he's going to buy 1-2 media companies, and the 1st one would be Time Warner, and the second one would be in the form of one of the "big four" broadcast tv networks. That's my take on this.

I can look at this one of two different ways:

1. Since broadcast television is dying anyway, why is owning a broadcast network so important?

2. If owning a broadcast network is important, Time Warner already owns half of one, so why not just take that and try to do what Rupert Murdoch did with Fox? Remember when the CW merger happened and some people thought that now that UPN and the WB didn't have to compete with one another, they could actually run down the Big Four? Didn't exactly happen that way...

There are a number of things that seem off with Disney buying Time Warner; given their assets they seem like two companies destined to compete with one another, even if one gets acquired by a third. There is definitely something very off about having Mickey Mouse and Bugs Bunny under one roof. As a comic book geek, I can tell you that Marvel and DC have practically been defined by their separate identities and rivalry with one another, with several characters that are redundant with the other company's characters, and very different attitudes, concepts, and general overall background to their respective universes, and it would be very odd to see them combined (although rumors of it happening have cropped up in the past when one or the other was doing particularly badly financially). And while ESPN picking up Turner's sports properties would theoretically effectively shut out any rivals to their throne, it would also give ESPN such a monopoly on NBA rights as to seem unnecessary and hard for one entity to deal with, and if talks were advanced enough by the time it came time to negotiate the next NBA contract (which is coming up quickly), the NBA would likely just replace Turner with somebody else. (And if you seriously think it would result in the rebirth of ABC Sports you don't understand why ABC Sports disappeared in the first place.)

 

[davidgheller47]

If that's the case I think we'll have a 5th major broadcast tv network here in the United States, and that 5th one, will be.... (Drum roll please) The WB Television Network, because I'm sure Jianlin is interested in starting a 5th major network, but the only way how he's going to do that is in 3 ways:

1. Buying CBS' stake in The CW Network.

2. Rename it The WB Network

3. Buying TV stations in big markets (New York, LA, etc.)

 

[Avid Listener]

If that's the case I think we'll have a 5th major broadcast tv network here in the United States, and that 5th one, will be.... (Drum roll please) The WB Television Network, because I'm sure Jianlin is interested in starting a 5th major network, but the only way how he's going to do that is in 3 ways:

I doubt if that will ever happen. There just aren't enough OTA stations in every market to hold 5 "major" networks per market, and there's not enough ad revenue to split 5 ways for OTA programming. And before anyone points out the obvious, I realize that in a 5-way split of ad revenue, it won't be 20/20/20/20/20. The higher rated networks will get the lion's share, and the new ones will get much, much less. But with the coverage that cable networks have, there's just no way a fifth network makes any sense. At best, a fifth network would be the biggest "minor" network, not the smallest "major".

Then again, if we're talking about a foreign gazillionaire throwing money around like a drunken sailor, anything could happen.

 

[TheBigA]

There are a number of things that seem off with Disney buying Time Warner

I agree. They are very careful with overspending and getting into too much debt. While they could afford to make this purchase, I really don't see it happening. Two very different cultures. Disney's stock price is very stable now, and buying TW isn't the kind of thing that would help it. They might want to buy Warner Studios, since it's next door. But not the whole enchilada.

 

[davidgheller47]

I doubt if that will ever happen. There just aren't enough OTA stations in every market to hold 5 "major" networks per market, and there's not enough ad revenue to split 5 ways for OTA programming. And before anyone points out the obvious, I realize that in a 5-way split of ad revenue, it won't be 20/20/20/20/20. The higher rated networks will get the lion's share, and the new ones will get much, much less. But with the coverage that cable networks have, there's just no way a fifth network makes any sense. At best, a fifth network would be the biggest "minor" network, not the smallest "major".

Then again, if we're talking about a foreign gazillionaire throwing money around like a drunken sailor, anything could happen.

You never know what will happen

 

[Morgan Wick]

If that's the case I think we'll have a 5th major broadcast tv network here in the United States, and that 5th one, will be.... (Drum roll please) The WB Television Network, because I'm sure Jianlin is interested in starting a 5th major network, but the only way how he's going to do that is in 3 ways:

1. Buying CBS' stake in The CW Network.

2. Rename it The WB Network

3. Buying TV stations in big markets (New York, LA, etc.)

The best ones to have would be the Tribune stations, as they may be the only non-Big Four English language stations in the whole country to produce their own news that aren't jilted ex-Big Four stations, but I don't know how willing they would be to part with WPIX, KTLA, and WGN. On the other hand, they've spun off all their newspapers and are in the process of divorcing WGN America from WGN Chicago, so they're probably less wedded to them than at any time in history.

I doubt if that will ever happen. There just aren't enough OTA stations in every market to hold 5 "major" networks per market, and there's not enough ad revenue to split 5 ways for OTA programming.

We're increasingly seeing two Big Four networks take up spots on subchannels of the same station, and many Fox stations in smaller markets are clearly a step down from the Big Three, or - more importantly - were before Fox came along. Toledo is the largest market without any candidate for a full-size CW/MyNet/WB station, and my hope is that the FCC will use the incentive auctions as an opportunity to equalize the number of stations in each market, at least to some degree. As for ad revenue, there's clearly enough of it for hundreds of cable channels. The game is rigged in favor of cable right now, but they're more poised to be rendered redundant by the increased use of Internet viewing than broadcast is; it would probably take an outsider to recognize that, and it doesn't get more outsider than a rich guy from China. The bigger regulatory obstacle is probably the rules specifically noting that the top four stations in each market have to be owned by four different people, which effectively protects the hegemony of the Big Four and saddles any other network with junior duopoly partners; I'd prefer that those rules be market-share-based.

 

[Avid Listener]

We're increasingly seeing two Big Four networks take up spots on subchannels of the same station, and many Fox stations in smaller markets are clearly a step down from the Big Three, or - more importantly - were before Fox came along. Toledo is the largest market without any candidate for a full-size CW/MyNet/WB station, and my hope is that the FCC will use the incentive auctions as an opportunity to equalize the number of stations in each market, at least to some degree. As for ad revenue, there's clearly enough of it for hundreds of cable channels. The game is rigged in favor of cable right now, but they're more poised to be rendered redundant by the increased use of Internet viewing than broadcast is; it would probably take an outsider to recognize that, and it doesn't get more outsider than a rich guy from China. The bigger regulatory obstacle is probably the rules specifically noting that the top four stations in each market have to be owned by four different people, which effectively protects the hegemony of the Big Four and saddles any other network with junior duopoly partners; I'd prefer that those rules be market-share-based.

When the only way certain businesses can survive is with a convoluted bunch of government regulations to stack the deck, then there are bigger problems to worry about. Countering one set of overwritten regulations with a different batch of overwritten regulations to attempt to micromanage the business is not the best answer.

 

[TheBigA]

As for ad revenue, there's clearly enough of it for hundreds of cable channels.

Keep in mind that the "hundreds of cable channels" are mainly owned by a handful of companies. If each channel was owned by one company, there wouldn't be enough audience, and consequently, not enough ad revenue to support this many channels. Economies of scale are what make it possible. However, ownership regulations prevent that from happening in over the air stations and networks.

 

[Morgan Wick]

When the only way certain businesses can survive is with a convoluted bunch of government regulations to stack the deck, then there are bigger problems to worry about. Countering one set of overwritten regulations with a different batch of overwritten regulations to attempt to micromanage the business is not the best answer.

We'll have to agree to disagree; I happen to be of the opinion that the free market does not automatically result in the best outcome simply because the free market is always right end of discussion, because I actually paid attention past the first day of economics class and I know something about how human beings actually act. The least regulation could do, though, is not show blatant favoritism towards the way the market is now in a way that suppresses new competition, as the "top four" rule does now, or regulate one set of firms more than another set of firms that, beyond technical distinctions irrelevant to the regulations, compete in the exact same market, as the FCC has done with broadcast and cable for decades. (And then pass a "convoluted bunch of government regulations to stack the deck" because that's "the only way certain businesses can survive" because of the earlier bunch of government regulations that stacked the deck the other way that are still on the books, unstacking the deck but giving the first set of firms more stake in the success of the second set of firms than their own, ultimately killing their business further...)

Keep in mind that the "hundreds of cable channels" are mainly owned by a handful of companies. If each channel was owned by one company, there wouldn't be enough audience, and consequently, not enough ad revenue to support this many channels. Economies of scale are what make it possible. However, ownership regulations prevent that from happening in over the air stations and networks.

Those "handful of companies" number at least eight.

To be clear, I'm not even sure that we need four major networks in the age of the Internet. I'm just still bitter about the CW potentially becoming a true fifth network but losing several potential affiliates to MyNetworkTV, having half its ownership have no interest in degrading its main business by fostering its own competition and the other half seemingly seeing the merger as a way to get out entirely, and ending up taken less seriously than either of its component networks as a result. I still think it could have happened; I don't know if it could still happen.

 

[TheBigA]

Those "handful of companies" number at least eight.

Yep...eight is a handful. And they sell combined audiences from various channels and networks that deliver a certain demographic. That's how cluster programming works in the TV realm, just as it does in radio. The ad revenue works because of the channels and platforms those companies control. It's going to be tough for a company like Tribune to come in with one cable channel and some major market OTA TV stations to be able to compete with Disney, Universal, Viacom, Time Warner, Fox, Discovery, and even Scripps.

 

[davidgheller47]

Yep...eight is a handful. And they sell combined audiences from various channels and networks that deliver a certain demographic. That's how cluster programming works in the TV realm, just as it does in radio. The ad revenue works because of the channels and platforms those companies control. It's going to be tough for a company like Tribune to come in with one cable channel and some major market OTA TV stations to be able to compete with Disney, Universal, Viacom, Time Warner, Fox, Discovery, and even Scripps.

I agree with TheBigA on this one, it's going to be hard for Tribune to even compete with some of the media giants like CBS, Disney, Scripps, etc.